Is the Japanese-US rate gap just too wide?
July 2 (Reuters) -USD/JPY climbed to a new 38-year peak Tuesday, on higher U.S. bond yields, and the move drew official comment. However, in an apparent break in what had become almost routine for Japanese officials, there was an absence of usual comments on the readiness to intervene.
A change in the Japanese response could suggest that while the yield gap between Japan and the U.S. is so wide, the effectiveness of intervention, longer-term, might be called into question.
USD/JPY has stalled ahead of another big figure, and consolidation has removed some bullish momentum, but a run above 162.00 is on the cards and analysts will no doubt point to 165.00 and 170.00 as potential targets.
However, the market shouldn’t be complacent given the speed and magnitude of the dollar's decline during the last bout of intervention, which saw USD/JPY slide from 160.24 to 151.86.
The authorities have expressed concern about the impact of rapid and one-sided forex moves on the Japanese economy and despite the lack of any reference to intervention in the latest warning the market shouldn’t rule out official action even when the yield gap continues to widen.
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USD/JPY daily candle chart: https://tmsnrt.rs/3RQ2SjI
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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